Pages in this set

Page 1

The exchange rate that equalizes the price of a basket of goods and services in two
countries. PPP is an attempt to measure the true value of a currency in terms of the
goods and services it will buy.

E.g £1= $2, then…

Page 2

Monetary Union X X X X

Economic Union X X X X X

Economic Monetary Union:

The deepest form on integration in which countries share the same currency and have a
common monetary policy as a result.

Monetary policy sovereignty:

The loss of monetary control a country faces when it…

Page 3

Extract Two

Economic Performance Indicators

­ Real GDP, Inflation Rate, Unemployment Levels and Balance of Payments; they all
provide a way of gauging the health and performance of an economy and give an
indication of what part of the economic cycle it is in

Real GDP
­ Gross Domestic Product…

Page 4

Fixed Exchange Rate
An exchange rate whereby the value of one currency expressed in terms of another
does not change between the two currencies

Floating Exchange Rate
An exchange rate whereby the value of one currency expressed in terms of another
varies with the forces of supply and demand for…

Page 5

Extract Three

Output Gaps
The difference between actual growth and the potential output of the economy

Welfare System
the system put in place and maintained by the government to support those who are
unemployed or have been employed but are retired

Page 6

The Stability and Growth Pact of the EU is the set of criteria designed to maintain
economic convergence within the EU monetary union, it states that a government's
budget deficit must not exceed 3% of GDP and National Debt must not exceed 60%
of GDP, if these criteria are not…

Page 7

Extract Four

World Trade Organisation (WTO)

A global organisation that regulates world trade. Has 150 members. Based in
Switzerland. Mission is "to help trade flow freely , smoothly, fairly and predictably".
This should create a trading system with the following characteristics:
· Non discriminatory
· Free trade
· Predictability
·…

Page 8

Tariffs

A tariff is a tax that raises the price of imported products and causes a contraction in
domestic demand and an expansion in domestic supply. The net effect is that the
volume of imports is reduced and the government received some tax revenue from the
tariff.